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Strategies & Market Trends : Analysis Class for Beginners -- Ignore unavailable to you. Want to Upgrade?

To: Arthur Tang who wrote (756)	4/10/1998 9:44:00 AM
From: Arthur Tang	Read Replies (1) \| Respond to of 1471

When money chases stock, should you worry about a crash? Better watch the economy. 1929 crash was caused by using excessive margin accounts. If you are not greedy enough to use margin account; you are personally safe from crash. Market always rebounded. 1987 crash was caused by running on the specialist. Some specialists were not liquid enough to handle a run. Merrill Lynch was then called in to serve as the clearing house. FEDs then use the overnight discount window to facilitate $1.5 billion rescue. With a large cash pool, the crash was reversed. But the fundamentals were very weak. Supply side economy did not work; and the revenue neutral tax reform turned out to be revenue increase in 1986. It took one year tightening the liquidity, due to 1986 tax increase, to cause the crash. Now, every year, FEDs are ready at the NY overnight discount window with reserves; $6 billion on October 1 last year. This year will be $8 billion. Next year will be $10 billion for Dow of 12,000. Today, the new economy is based on demand side economy assisted by supply side economy which is Treasury bond interests and social security (35 million)recipient's and government (1 million)workers's CPI increases. The trend will continue, with the supply side carefully weaned to demand side economy. Supply side economy will become smaller and smaller. Job creation provided the surplus savings for the investments on Wall street. If redemption cash portions are carefully kept on Wall street, this phenomena will go on forever. Because job creation is controlled in the demand side economy by obsolescense and replacement theory on products and services. New products and services provide higher standards of living for every one (population increase rather than population zero growth in the past)on earth, which provides the ever increasing market and thus the new economy.